Corporate insolvency & restructuring report 2021: Switzerland
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Corporate insolvency & restructuring report 2021: Switzerland

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Stefan Kramer and Stefan Bindschedler, Homburger

The first wave of Covid-19 infections hit Switzerland in March 2020, causing the Swiss federal government – the Federal Council – to enact strict measures to combat the spread of the virus. In particular, it imposed restrictions on border crossings and ordered that all schools, shops, restaurants and bars, as well as all entertainment and leisure facilities, be closed, such measures only to be eased gradually in the course of May and June 2020.

Due to again rapidly increasing number of infections in September and October 2020, both the Federal Council and cantonal governments tightened public health measures again, without, however, imposing a strict lockdown in order to find a balance between epidemiological necessity and economic viability. Whereas restaurants, bars and entertainment and leisure facilities generally had to close only on December 22 2020 until April/May 2021, shops selling non-essential goods remained open until January 18 2021 and then were only shut down until March 1 2021. In contrast, all schools stayed operational throughout the second wave of infections.

Even though the Swiss economy was undoubtedly dealt a severe blow, as many companies were forced to temporarily restrict or even – in certain sectors – suspend their activities in the wake of these measures, the worst economic fears have so far failed to materialise. While the GDP initially was expected to plunge by approximately 6%, it eventually only decreased by 2.9% over 2020 as a whole. Unemployment currently stands at approximately 2.7%, whereas it was 2.3% in 2019. The number of new bankruptcy proceedings has so far not significantly increased.


To counteract the negative effects of its public health measures, the Federal Council enacted a wide variety of support initiatives to give troubled businesses a hand. Of these initiatives, in hindsight, four broad responses emerged as the most significant.

In the first, the Federal Council adopted temporary changes to short-time work compensation, which in general proved to be an effective instrument to combat the economic impacts of Covid-19, being namely the following:

  • The entitlement was extended to certain employees who were previously not covered, such as temporary employees, apprentices and, under certain conditions, employees on call. Such extended entitlement will continue to apply until September 30 2021;

  • The period of entitlement was initially prolonged from 12 months to 18 months and thereafter further extended to 24 months, lasting until February 28 2022; and

  • The general process was also simplified and streamlined and the period of authorisation was extended from three to six months. While the simplified pre-application process remained in place until August 31 2021, the simplified accounting process will be retained until at least September 30 2021, whereas the prolonged period of authorisation will be phased out until December 31 2021.

A second key initiative was government-backed bridge loans. On March 25 2020, the Federal Council established a secured bridge loan-programme, which was designed to provide secured bridge loans in a rapid and unbureaucratic manner. It consisted of two types of bridge facilities:

  • Covid-19-Loan: loans up to CHF500,000 (approximately $539,000), 100% (indirectly) secured by the Swiss Confederation by means of a joint surety and granted within a short timeframe, based solely on the information and documentation provided by the applicant and without any further credit checks.

  • Covid-19-Loan-Plus: loans exceeding CHF500,000 and up to a maximum of CHF20 million, 85% (indirectly) secured by the Swiss Confederation by means of a joint surety and preceded by a credit check by the relevant lending bank in line with standard industry practice.

The maximum credit amount was limited to 10% of the applicant’s turnover in the preceding financial year. Notably, companies (i) with a turnover over CHF500 million or (ii) not being (significantly) economically affected by the pandemic were not eligible.

Covid-19-Loans/Covid-19-Loans-Plus could only be applied for until July 31 2020 and the programme was eventually not renewed. The relevant ordinance of the Federal Council was, however, transformed into statutory law as of December 18 2020. Key provisions include the following:

  • Term: The term initially was set at up to five years with the possibility of a hardship-extension for an additional two years. The Swiss parliament prolonged the term to up to eight years, thereby keeping the aforesaid option for a hardship-extension.

  • Interest: The interest rate was set at 0.0% per annum, for Covid-19-Loans, whereas Covid-19-Loans-Plus bear an interest rate of 0.5% per annum on the amount which is (indirectly) secured by the Swiss Confederation. The interest rate on the remaining, unsecured part of the Covid-19-Loans-Plus is at the discretion of the parties. Such interest rates may generally be increased once per year to take into account any market developments.

  • Purpose: Covid-19-Loans/Covid-19-Loans-Plus are designed to satisfy liquidity needs only. Insofar, a borrower is generally no longer permitted to distribute dividends/royalties, reimburse capital contributions or grant, refinance or repay intragroup loans (subject to certain exceptions). Since December 18 2020, the use for necessary new investments is permitted. Non-compliance with these restrictions may trigger civil law liability and criminal law sanctions.

A third initiative, initiated after the bridge-loan programme had expired and was not renewed in Autumn 2020, introduced so-called hardship measures. The relevant ordinance of the Federal Council entered into force on November 25 2020. It grants the cantons the right to support businesses in the form of loans, sureties or guarantees or non-repayable contributions, of which – subject to certain requirements – the Swiss Confederation will (indirectly) bear 50%. Preconditions include, alternatively, a decrease of turnover of at least 40% compared to the average turnover of 2018 and 2019 or closure of the business for at least 40 days between November 1 2020 and June 30 2021 due to the public health measures. Any company benefitting from hardship measures may generally no longer distribute dividends/royalties or grant loans to its shareholders in the relevant business year and thereafter for a period of three years, unless the relevant financial support is repaid earlier.

A fourth key pillar of the government’s response was the modified insolvency regime. In mid-March 2020, the Federal Council ordered a stay of enforcement from March 19 to April 4 2020 (prolonged by the statutory enforcement holidays until April 19 2020) and a standstill or extension of the deadlines in court proceedings from March 21 until April 19 2020. On April 16 2020, the Federal Council enacted substantive, temporary measures in relation to the Swiss insolvency regime that remained in force until October 20 2020 only and included the following:

  • A suspension of the duty of the board of directors to notify the bankruptcy court in case of over-indebtedness in certain circumstances (see below under ‘Directors’ duties’);

  • A new Covid-19-Moratorium for small and medium-sized enterprises, which provided such companies with a simple and straightforward procedure to obtain a temporary deferral of their payment obligations in order to reorganise and prepare for the time after the crisis; and

  • Certain other amendments such as facilitations to enter into a moratorium and an extension of the provisional moratorium to six months.

Basic framework

Under Swiss insolvency laws, there is no group insolvency concept, so each entity must be dealt with separately. However, sector-specific rules may apply. In particular, insolvencies of banks, securities firms, insurance companies, collective investment schemes and fund managers are subject to special regimes.

Enforcement proceedings are generally not initiated ex officio, but rather require a petition. The debtor itself must initiate insolvency proceedings in the event of overindebtedness (i.e. when its liabilities exceed the value of its assets (see below under ‘Directors’ duties’)). If a creditor seeks to initiate insolvency proceedings, it must file an enforcement request with the competent debt collection office and pass through an introductory phase. As a rule, this introductory phase is mandatory; in extraordinary circumstances, however, the debtor, a creditor or the statutory auditors can directly apply for declaration of bankruptcy to the bankruptcy court.

Broadly, the Swiss Federal Debt Enforcement and Bankruptcy Act (DEBA) provides for three types of debt enforcement:

  • Enforcement of unsecured claims against individuals will, subject to the below, be pursued by way of seizure and realisation of assets belonging to the debtor to the extent necessary to cover the claim.

  • Enforcement of unsecured claims against individuals and legal entities registered in the Swiss commercial register will lead to bankruptcy proceedings opened against the debtor. In limited circumstances, bankruptcy proceedings are available also for individuals not registered in the commercial register. Once bankruptcy proceedings have been opened, all the debtor’s assets form an estate over which the debtor can no longer dispose. The estate is then realised, and the proceeds are distributed among the creditors, taking into account their claims’ value and priority.

  • Enforcement of secured claims both against natural persons and against legal entities might have to be pursued by way of realisation of the collateral.

To avoid bankruptcy, debtors facing financial distress may be able to apply for a moratorium under Swiss corporate law (or, until October 20 2020, were able to apply for a Covid-19-Moratorium). In addition, as an alternative to bankruptcy proceedings, the DEBA provides for statutory composition proceedings, which allow for a restructuring of the company with a view to continuing its business on a sounder basis and for liquidation of the company in a manner that is more beneficial to creditors than bankruptcy proceedings. Composition proceedings provide for the ability to achieve reorganisation during a moratorium by way of a composition agreement between the debtor and its creditors. Eventually, any composition agreement needs to be approved by the competent court and thereafter becomes binding on all creditors.

Directors’ duties

In case of a substantiated concern of over-indebtedness, the board of directors of the relevant company has to procure that an (audited) interim balance sheet be drawn up based on (i) liquidation values and (ii) going concern values. For purposes of this calculation, any Covid-19-Loans (unlike Covid-19-Loans-Plus) and any loans, sureties or guarantees based on the hardship measure framework will not be taken into account, and the interim balance sheet did not have to be audited for the period until October 20 2020. If the interim balance sheets show over-indebtedness, the board of directors must notify the bankruptcy court without delay. Non-compliance with this obligation may expose the board of directors to both civil law liability and criminal law sanctions and the statutory auditors have the obligation to notify the competent court in such case.

“While the GDP initially was expected to plunge by approximately 6%, it eventually only decreased by 2.9% over 2020 as a whole. Unemployment currently stands at approximately 2.7%, whereas it was 2.3% in 2019.”

The board of directors need, however, not file for bankruptcy if: (i) creditors with claims in an aggregate amount not lower than the amount of the over-indebtedness subordinate their claims against the claims of all other creditors; (ii) if there is a substantiated likelihood for an informal workout within a relatively short period of time; or (iii) under the Covid-19 modified insolvency regime, which expired on October 20 2020, if there was a prospect that the over-indebtedness will be eliminated by December 31 2020, provided that the debtor was not already over-indebted on December 31 2019.

While the criterion of over-indebtedness is based on a balance sheet test (rather than a liquidity test), the loss of the going concern assumption leads to an obligation to account for liquidation values, which will, in turn, typically result in over-indebtedness. Under Swiss law, such going concern assumption is lost if it is intended or probably inevitable that all or some activities of the company will cease in the next 12 months.

To that effect, the board of directors must examine the current economic situation and future business development with a budget and a liquidity plan, taking into account the order book, the situation vis-à-vis lenders, the procurement of liquidity through the sale of assets, etc. As soon as the debtor loses such going concern assumption for accounting purposes, going concern values become irrelevant and the test is exclusively based on liquidation values. In times of financial distress, the board of directors must therefore intensify its supervision and monitoring activities in general and place enhanced scrutiny on the ongoing assessment of the going concern assumption.

The board of directors generally has a fiduciary duty to safeguard the interest of the company and, as such, in times of financial distress, must convene regularly and prepare restructuring and/or refinancing strategies as well as contingency plans. If the prospects of successful restructuring and/or refinancing fade, its fiduciary duty shifts, however, towards safeguarding the interests of the creditors.

Challenging a debtor’s transactions

The insolvency administration and certain creditors may, under certain conditions, void transactions. A transaction that is detrimental to the debtor’s creditors may be voided in the following cases:

  • The debtor has made a gift or a disposal of assets without any or with a disproportionate consideration, provided that the debtor made such transaction within the last year prior to the seizure, the opening of bankruptcy proceedings or the granting of a moratorium.

  • In addition, certain actions are voidable if performed by the debtor within the last year prior to the seizure, the opening of bankruptcy proceedings or the granting of a moratorium, provided that the debtor was already (recognisably) overindebted at that time: (i) granting of security for already existing claims, provided that the debtor was not previously obliged to grant such security, (ii) payment of a monetary obligation in any way other than by payment in cash or other customary means of payment, and (iii) the payment of a debt not due.

  • Any acts performed within the last five years prior to the seizure, the opening of bankruptcy proceedings or the granting of a moratorium performed by the debtor with the (perceptible) intention to disadvantage its creditors, discriminate some creditors against others or to favour some creditors to others are voidable.

Crossing borders

Switzerland’s international insolvency law is governed by the Swiss Federal Act on Private International Law (PILA). In the event that bankruptcy, composition or similar proceedings are initiated outside Switzerland, the debtor’s assets located in Switzerland cannot directly be handed over to the foreign administrator. The foreign administrator is generally not allowed to collect assets located in Switzerland or take any legal actions unless and until the foreign proceedings have been recognised in Switzerland pursuant to articles 166 et seq. PILA.

“Swiss businesses have so far generally coped well with the adverse economic environment and the challenges they are facing in connection with Covid-19.“

The relevant procedure can be summarised as follows: The foreign administrator or creditor needs to request recognition of the foreign bankruptcy or composition decree. Recognition is only granted if certain conditions are met (for example, competence of the relevant non-Swiss court, no violation of Swiss public policy etc.). If recognition is granted, the court opens auxiliary proceedings with respect to the assets of the debtor located in Switzerland (secondary proceedings). Following liquidation, the proceeds are used to pay down the collateralised claims and privileged claims of Swiss creditors. Where there is a surplus, its distribution depends on how the other Swiss creditors’ claims are treated in the schedule of accepted claims in the foreign proceeding. The surplus is transmitted to the foreign proceedings only where such claims are adequately addressed. Otherwise, the surplus is paid out to the Swiss creditors.

Under certain circumstances, however, a dispensation from secondary proceedings may be granted. If this happens, the foreign administrator will be conferred the same powers in Switzerland as it has under the laws of the main proceedings. Also, if the foreign debtor has a branch in Switzerland, the law allows for the initiation of separate bankruptcy proceedings with regards to that branch. Such proceedings will be governed by the DEBA.

Looking ahead

Swiss businesses have so far generally coped well with the adverse economic environment and the challenges they are facing in connection with Covid-19. Even the second wave of infections and the related public health measures in Autumn 2020 did not unravel their continuous good state and a wave of bankruptcies has – for the time being – not occurred, not least because of the governmental support measures which have proved effective, notably in respect of securing liquidity.

However, while certain Swiss business have done relatively well in recouping their pre-crisis turnover due to a generally solid demand, it remains to be seen how swiftly business areas that still are considerably affected by the pandemic (e.g. tourism) can recover. Also, only time will tell whether the burden due to any additional debt incurred during the crisis will prove to be too heavy for certain Swiss businesses, in particular if (and when) governmental support measures will be fully lifted.


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Stefan Kramer



Zurich, Switzerland

T: +41 43 222 16 35


Stefan Kramer is a partner and head of Homburger’s restructuring & insolvency team.

Stefan regularly works on insolvency-related matters, including recovery and resolution planning and cross-border recognition of insolvency measures. He also advises on all regulatory aspects, including banking and stock exchange regulations and derivatives market regulations.

Stefan is a graduate of, and holds a PhD from, the University of Zurich and has completed a LLM at Harvard Law School.


Stefan Bindschedler



Zurich, Switzerland

T: +41 43 222 12 21


Stefan Bindschedler’s practice focuses on financial markets and banking law, financial services regulation as well as corporate and commercial law.

Stefan regularly advises on syndicated debt financings, buyout financings and financial restructurings. He also advises on regulatory aspects, including banking and stock exchange regulations.

Stefan is a graduate of the University of Berne and has completed a LLM at New York University School of Law.

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